Slipping and lack of coolant flow
The main trouble encountered with trannys is slipping of the clutches and a lack of coolant flow at lower engine rpms.
When a tranny has to pull hard against a load, the internal components and clutches 'slip' more than normal, building up heat from fluid friction. Even after the torque converter locks up in overdrive, slipping can occur greatly adding to heat build. Add to this that when the engine rpms are down, the fluid flow in the tranny is much slower, you can have a critical temp rise followed by rapid fluid degradation and eventual failure of the tranny. Gear 'hunting' is a bad signal of slippage.
By going into tow mode, the tranny usually stays in a lower gear, thus increasing fluid flow and allowing easier torque transfer. This translates to much lower fluid temps.
Personally, I decided to put gauges on to monitor the fluid temps and slippage %'s. If I notice excessive slippage, like towing heavy loads with my pickup, I'll drop it into tow mode. Or if the tranny temp climbs (stop and go traffic and backing up to trailers is terrible on temps), I'll kick it to a different gear to lower temps.